June 12, 2020 / 7:35 PM / a month ago

UPDATE 1-Argentine government extends debt talk deadline to June 19, bonds edge higher

(Adds deadline extension announcement)

By Adam Jourdan and Nicolás Misculin

BUENOS AIRES, June 12 (Reuters) - Argentina over-the-counter bonds closed higher on Friday after the government announced an extension to June 19 for debt talks with creditors on the restructuring of $65 billion.

The country’s sovereign bonds were up an average 0.9%, while the local Merval stock index had gained more than 4%, continuing a surge as investors with an appetite for risk flock to Argentine assets despite the country’s crises.

The extension came as a deadline for reaching a deal with bondholders expired, further drawing out talks that have been underway for months to restructure a painful debt load that Argentina says that it cannot pay. After its ninth sovereign default in May, striking a deal is key for Argentina in averting a long and messy legal standoff with creditors.

Argentina’s economy ministry, which is expected to unveil a sweetened offer, said in the statement that it had spoken with investors about potential adjustments and was analyzing their suggestions.

“Argentina and its advisers intend to take advantage of this extension to continue discussions and allow investors to continue contributing to a successful debt restructuring,” the statement said.

Argentina’s bonds, which slumped last year into distressed territory, have been higher in the last month as talks have progressed, despite a gap remaining between what Argentina is willing to pay and what key creditor groups want.

“We remain pretty optimistic and price action underlines that,” said one bondholder who is not part of the main creditor committees involved in the negotiations.

“Maybe the new offer will be a modest improvement but they will want to get reasonably high acceptance to reduce the risk of litigation,” he said. (Reporting by Adam Jourdan, Nicolas Misculin, Hernan Nessi in Buenos Aires and Tom Arnold in London; writing by Cassandra Garrison and Editing by Steve Orlofsky and Grant McCool)

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